Many condominium corporations share facilities with other condominium corporations or other properties. Usually there is an agreement in place which obligates all parties that use or benefit from the shared facilities to contribute to the costs of operating and maintaining them in accordance with the proportions set out in the agreement.
In a recent case, Middlesex Condominium Corporation No. 229 v. WMJO Ltd., MCC 229 had to commence legal proceedings to collect a portion of the costs of operating and maintaining a private sewage pumping system that also serviced three other condominium corporations and a housing cooperative.
The private sewage system was located on the lands of MCC 229, which was a 43-unit townhouse condominium. The sewage system also serviced a total of 42 townhouse units in three other condominiums and 71 units in a housing cooperative. All of the units of the three other condominiums were owned by WMJO Ltd., the developer of those three condominiums. The developer of MCC 229 and a prior owner of the other three condominium properties had entered into a joint use and maintenance agreement, which included a provision that the each phase of the townhouse project would “be responsible for a proportionate share of the costs and expenses of maintenance, repairs and/or replacement of the joint facilities”. This agreement was registered on title.
For more than ten years, WMJO, through its property managers, paid invoices from MCC 229 relating to the sewage system, although late payments had been an ongoing issue throughout this time. All payments stopped after 2006. The principal of WMJO took the position that it had never agreed to pay any expenses related to the sewage system and that any payments made in the past were paid in error by its property managers.
MCC 229 sued the three condominium corporations, WMJO and WMJO’s current property manager. The court declared that the property manager had no liability to MCC 229 as the manager was acting in its capacity as manager for WMJO. The case against the three condominium corporations was dismissed as they were not signatories to the joint use agreement. Although the joint use agreement was registered on title, positive covenants do not run with the land and therefore the obligation to contribute to the shared costs of the sewage system could not be enforced against any subsequent landowners.
WMJO was also not a party to the agreement that was registered on title. However, the court concluded that WMJO was responsible to pay for its share of the costs on the basis of unjust enrichment. MCC 229 had successfully established the three elements necessary for recovery on the basis of unjust enrichment:
- WMJO was enriched, as it saved considerable expense by connecting into MCC 229’s sewage system rather than having to construct one to service the units it owned.
- MCC 229 suffered a corresponding deprivation as it was operating and maintaining a sewage system that was considerably larger than required for its 43 units.
- There was no juristic reason to permit the enrichment, such as, for example, an intention to make a gift or where a statute denies recovery.
The court rejected WMJO’s position that MCC 229 was seeking to enforce an unenforceable positive covenant by pursuing a remedy for unjust enrichment. Because the positive covenants in the joint use agreement were not enforceable, if it were not for the remedy of unjust enrichment, it would be unfair for WMJO to get the benefits from the sewage system without having to incur any expenses for it.
Most shared facilities agreements are entered into by the developer early on in the development of the project and before all of the condominium corporations in the project have been created. In order to ensure that the condominium corporations will be responsible for the positive covenants, most developers will include in the condominium declaration an obligation to assume and become a party to any cost sharing agreements. In addition, before control of the condominium corporation is turned over to the unit owners, the developer-controlled condominium corporation will enter into the necessary assumption agreements.
